Fitch said that while Canada’s public debt is forecast to decline and will stay within the tolerance of an ‘AAA’ rating under Fitch’s baseline projections, “the high debt burden highlights its more limited fiscal space compared with rating peers.”

However, it adds that “Canada’s track-record of debt reduction in the past and ample domestic financing flexibility are important mitigating factors.”

Meanwhile, Fitch notes that Canada’s economic growth remains moderate and that the rebalancing of growth drivers from consumption and construction towards capital investment and exports has taken longer than previously anticipated.

Economic growth has been adversely impacted by slower U.S. growth, although structural impediments and lagging competitiveness are also hurting Canadian exports, it said, adding that rising external demand and exports would be important to get a renewed boost for investment.

Fitch forecasts Canada’s economic growth will average 2.3 per cent “during 2014-2016″ although “risks are on the downside as consumption growth has moderated and global economic prospects are uncertain.”